Net income for the three months ended Dec. 31 climbed to
$516.1 million or $2.42 a share, from $480.8 million or $2.20, a
year earlier, the San Mateo, California-based company said today
in a statement. Earnings beat the $2.38-a-share average estimate
of 20 analysts surveyed by Bloomberg.

Chief Executive Officer Gregory Johnson has been urging
investors to put more money into stock funds, arguing that
equities are likely to deliver better returns than they did in
the past decade. Franklin’s stock funds had $6.4 billion in
withdrawals during the quarter, which Johnson, in pre-recorded
comments on the firm’s website, said reflected “lumpy
institutional redemptions.” Investors deposited $6.9 billion
into Franklin’s bond funds during the quarter.

“Given the rebound in investor flows we are seeing across
the industry in January, I would expect to see a meaningful snap
back at Franklin in the current quarter,” Michael Kim, an
analyst with Sandler O’Neill & Partners LP in New York, said in
a telephone interview.

Franklin rose 2.1 percent to close at $139.77 in New York.
The shares have gained 11 percent this year, the same as the
increase for the 20-member Standard and Poor’s index of custody
banks and asset managers.

Net Deposits

Stock mutual funds in the U.S. attracted $14.3 billion in
net new money in the week ended Jan. 9, the most since at least
2007, according to the Washington-based Investment Company
Institute. Both domestic and international equity funds won
money in the first two weeks of 2013, ICI data show.

Franklin had $300 million in net deposits in the fourth
quarter and $13.6 billion for the year.

Equity-oriented funds accounted for about 39 percent of
Franklin’s $782 billion in assets at year-end, and bonds
represented about 45 percent. Franklin’s equity assets climbed
to $303 billion as of Dec. 31, up 12 percent for the year, as
the MSCI All-Country World Index rose 13 percent in 2012. More
than 70 percent of the firm’s stock assets are global or
international.

Hasenstab’s Fund

The company’s flagship fund, the $67 billion Templeton
Global Bond Fund, bounced back last year after trailing 91
percent of rivals in 2011, according to data compiled by
Bloomberg. The fund, managed by Michael Hasenstab, gained 16
percent in 2012, better than 90 percent of peers.

Hasenstab’s results were driven by bets on countries such
Ireland and Hungary, whose bonds rallied 29 percent and 22
percent, according to Bank of America Merrill Lynch index data.
Templeton Global Bond had 9 percent of its money in Irish bonds
and 5.8 percent in Hungarian bonds as of Nov. 30, according to a
regulatory filing.

Hasenstab’s fund attracted $1.5 billion in deposits in the
fourth quarter, data from Chicago-based Morningstar Inc. show.
That compares with $355 million in the third quarter. Hasenstab
manages more than $175 billion.

Franklin in September agreed to pay about $183 million for
a majority stake in K2 Advisors Holdings LLC, a fund-of-hedge-fund manager with $9.3 billion in assets. Starting in 2016,
Franklin will acquire the rest of Stamford, Connecticut-based K2
over a period of several years.